Commentary

I10.218 Burden of tax on settled property

IHT, trusts and estates

I10.218 Burden of tax on settled property

I10.218 Burden of tax on settled property

Settled property passing on death

The general equitable principle is that IHT is borne by capital whilst any interest on IHT is payable out of income1.

The IHT on property which was comprised in a settlement immediately before the death is not treated as a testamentary expense2.

This applies to settled property in which the deceased had an interest in possession immediately before his death3, even if the property vests in the deceased's personal representatives (PRs) or is disposed of by the deceased's Will, even where it is disposed of in exercise of a general or special power of appointment, or in exercise of the statutory power to dispose of entailed property4.

Property subject to a general power of appointment exercisable by a testator's Will falls into his residuary estate if there is a general residuary gift and he does not express an intention not to exercise the power5.

Any money held on the trusts of a settlement may be used to pay IHT (together with interest thereon and costs properly incurred) attributable to the value of any property comprised in the settlement and held on

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